New default notices were way down last month in Las Vegas, above, and Reno.

Foreclosure filings in Nevada plunged in October during the first month of a new state law stiffening foreclosure-processing requirements.

Slightly more than 600 default notices were filed against homeowners through Oct. 25 in the state’s two most-populous counties, Las Vegas’s Clark County and Reno’s Washoe County. That was down from 5,360 in September, or an 88% drop, according to data tracked by ForeclosureRadar.com, a real-estate website that tracks such filings. Default notices represent the first step in processing foreclosures.

Nevada’s state Assembly passed a measure that took effect on Oct. 1 designed to crack down on “robo-signing,” where bank employees signed off on huge numbers of legal filings while falsely claiming to have personally reviewed each case. Banks suspended their foreclosure filings one year ago and have gradually restarted them after those and other improper foreclosure-processing practices surfaced.

Among other steps, the Nevada law makes it a felony—and threatens to hold individuals criminally liable—for making false representations concerning real estate title. Individuals are also subject to civil penalties of $5,000 for each violation.

Foreclosures have slowed sharply over the past year in many states where banks are required to foreclose on homeowners through courts. But slowdowns haven’t yet been as pronounced in non-judicial states such as Nevada, where foreclosures are conducted by an administrative process.

To foreclose on homeowners in Nevada and most other non-judicial states, banks hire a “trustee” that notifies borrowers that they are in default and then carries out the foreclosure sale in accordance with state law if the borrower doesn’t become current on the debt.

The Nevada law makes an important technical change to those rules by forbidding trustees from handling foreclosures if the trustee is a subsidiary of foreclosing bank. That change appears to strike a blow for Bank of America Corp., which uses a wholly owned subsidiary, ReconTrust, as its trustee for foreclosures in Nevada and other western states. ReconTrust wasn’t involved in filing any default notices in Nevada during the month of October, according to the ForeclosureRadar data. A Bank of America spokesman declined to comment.

Real estate agents and housing investors say the law could have unintended consequences if it hinders the ability of the housing market to clear. In hard-hit housing markets like Las Vegas, foreclosures have been among the fastest-selling properties. They accounted for around half of all home sales there during the third quarter, according to SalesTraq, a local real-estate firm.

“It leaves this shadow,” says Sean O’Toole, president of ForeclosureRadar. “If you’re a buyer, and you don’t know when or how that market’s going to clear, it’s not going to leave you a lot of confidence in investing in that area.”

But advocates of the bill say the measure will put the real-estate market on sound footing by ensuring that title defects don’t later lead judges to invalidate foreclosures—a step that has already happened in Michigan and Massachusetts.

“This is not at all about preventing foreclosures. It is about helping end users,” says Tisha Black Chernine, a real-estate lawyer in Las Vegas who was part of a working group that helped draft the bill.

In order to truly heal housing markets, “we need to make sure foreclosures are done properly,” she said. “People taking title pursuant to a bad foreclosure run the risk of having no title at all.”

The foreclosure slowdown in Nevada comes amid signs that banks are begin to ramp up foreclosures across many other parts of the country. The rate at which banks started new foreclosures increased to the highest level this summer since banks were forced to sharply decelerate the process one year ago, according to a report released Monday by Fitch Ratings.

Banks initiated foreclosures on around 10% of all mortgages that hadn’t made any payments in more than two months, double the historical lows from one year ago. That is still below the average 14% rate for the past decade. The Fitch Ratings analysis looked at loans that were bundled and sold as mortgage-backed securities without any government guarantees.

The uptick is a sign that banks and other mortgage companies “are playing catch-up on actions that have been delayed over the past year,” said Diane Pendley, managing director at Fitch Ratings.